KATHMANDU: In the murky case surrounding share transactions, the controversial telecommunications company Ncell is confronting financial liabilities exceeding a billion rupees.
Ncell, which missed the May 28 deadline for its five-year telecommunication service license renewal fee, is now embroiled in a lawsuit, with significant financial obligations including the renewal fee.
Government investigations into Ncell’s share transactions have revealed that the company still owes nearly 16 billion rupees to various banks.
Additionally, the five-year license renewal fee, which was due on May 28, has accrued to 20 billion rupees, including 15 percent in damages. This amount is now payable by August 31.
The government report also indicates that Ncell is facing unresolved legal issues related to capital gains tax, frequency duties, and income tax, which remain pending in court.
According to the share purchase and sale agreement between Malaysia’s Axiata Group Berhad and Shatishlal Acharya’s Spectralite UK on December 1, 2023, Axiata has stated it will not assume any of Ncell’s liabilities.
This raises a critical question regarding the future of Ncell, given its substantial financial burdens.
How Much Is Ncell’s Liability?
The report from the committee led by Tankamani Sharma Dangal reveals that Ncell is currently encumbered with liabilities amounting to billions of rupees.
Despite being managed by foreign investors, Ncell has not secured loans from any foreign banks.
The company has outstanding debts of 3.725 billion rupees in working capital loans and 12.125 billion rupees in long-term loans from various Nepali banks, dating back to the financial year 2079/80 BS.
As of the end of the financial year, Ncell’s accumulated profit stands at 17.089 billion rupees.
The sale of Axiata’s shares at a seemingly low price has generated significant concern among Nepali citizens, media, regulatory bodies, and political circles.
However, the report indicates that the company has deposited only 9 billion rupees in the bank, attributing the remaining amount to expenses under the guise of investments in various sectors.
Ncell’s fixed assets are valued at 31.056 billion rupees, while its current assets total 17.048 billion rupees. Current liabilities amount to 11.753 billion rupees.
If the outstanding court cases, renewal fees, and fines are excluded, Ncell appears to be in a positive financial position.
However, in securing loans, Ncell has pledged all its imported equipment through a 5 percent Letter of Credit (LC).
Additionally, the report notes on page 41 that Axiata Group Berhad acted as a guarantor for these loans.
Nevertheless, according to the share purchase and sale agreement with Shatishlal Acharya, Axiata will no longer assume this responsibility.
Similarly, Ncell has an outstanding payment of 1.7268 billion rupees to the Telecommunication Authority for the use of the 2100 MHz band, covering the period from the financial year 064/65 to the end of 080/81.
This issue has been unresolved in the Supreme Court for an extended period.
Additionally, the research report reveals that the total liability for pending cases involving the company in various courts amounts to 85 billion rupees.
Shatishlal’s Questionable Entry into Ncell amid Massive Liabilities
In the ongoing saga of Spice Nepal Pvt Ltd, established on June 21, 2001, for operating mobile services in Nepal, significant developments occurred on December 1, 2023.
Axiata Group, which previously held an 80 percent share in Ncell, announced the sale of its entire stake.
Axiata sold its 100 percent shareholding in Ncell to SpectraLite UK Limited, a company owned by Singaporean Satish Lal Acharya.
According to the financial statement for the fiscal year 079/80, Axiata sold its 80 percent stake, which had yielded a post-tax profit of 4.2544 billion rupees, for 6.5 billion rupees, payable in installments until December 29, 2029.
This stake was originally purchased seven years earlier in partnership with TeliaSonera of Sweden for 104.478 billion rupees.
Following Satish Lal’s acquisition, nearly all Ncell shares, except for 11, are now under the control of his family.
Why would he invest in Ncell under these conditions? Is there a strategy to acquire shares and subsequently shift liabilities, similar to what happened with Smartcell? These are pressing questions now being directed at him.
When Axiata departed, it owned 80 percent of Ncell Axiata Pvt Ltd, while the remaining 20 percent was held by Sunivera Capital Ventures Pvt Ltd, a company owned by Satish Lal’s wife, Bhawana Singh Shrestha.
The sale of Axiata’s shares at a seemingly low price has generated significant concern among Nepali citizens, media, regulatory bodies, and political circles.
This unease is compounded by unresolved issues from 2016 regarding capital gains tax on the Ncell shares’ transfer between TeliaSonera and Axiata, which raised suspicions of tax evasion and irregularities.
The media spotlighted the issue, and several parliamentary committees, including the Public Accounts Committee, Finance Committee, State Affairs and Good Governance Committee, and Education and Information Technology Committee, began investigations.
Additionally, the Chairman of the Public Accounts Committee, Rishikesh Pokhrel, requested the Authority Abuse Investigation Commission to probe the share transactions.
In response, the government formed a five-member investigation committee, led by former Auditor General Tankamani Sharma Dangal, on December 7, 2023.
The Dangal-led committee submitted its report on January 29, 2024, following an extensive study.
Despite the report’s completion, the government has kept its findings confidential.
However, Khabarhub has obtained the report from a high-level government source.
The committee included Secretary Fanindra Gautam, Joint Secretaries Ritesh Kumar Shakya and Baburam Bhandari, and Nepal Chartered Accountants Association President Sujan Kumar Kafle.
The Dangal-led committee submitted its findings to the government on January 15, 2008. However, the government has been reluctant to release the report publicly.
Notably, the report highlights a decline in Ncell’s profitability from the fiscal year 072/73 to 079/80.
The company’s profit after tax fell from 20.8085 billion rupees in 072/73 to 4.2544 billion rupees by 079/80.
The government led by Pushpa Kamal Dahal ‘Prachanda’ formed a committee to investigate Ncell’s share purchase and sale but did not release the report or advance its findings.
Given the declining profits, pending court cases, and a five-year license renewal fee exceeding 20 billion rupees, questions arise about Satish Lal’s motivations.
Why would he invest in Ncell under these conditions? Is there a strategy to acquire shares and subsequently shift liabilities, similar to what happened with Smartcell? These are pressing questions now being directed at him.
Unnatural Contracts: A Report
The government investigation report has raised concerns about the legitimacy of the agreement between Satish Lal Acharya and Axiata Group, describing it as unnatural.
This raises a hypothetical question: if Ncell fails to pay its five-year license renewal fee, the company’s license will be automatically revoked.
Both UTL Telecom Company and Smart Cell Company have previously defaulted on billions of rupees owed to the Nepal Telecommunication Authority. Satish Lal, who is a director at Smart Cell, faces a 3 billion rupee debt with the bank.
Smart Cell’s license was subsequently revoked for failing to pay frequency and renewal fees.
Page 66 of the investigation report criticizes the credibility of the agreements between the two parties. It notes that the agreements lack adherence to the principle of good faith.
Furthermore, page 67 highlights that the agreements suggest an intention to continue business operations after acquiring the Smart Telecom license.
The report also questions the financial transactions between Axiata and Satish Lal, noting that the agreement’s installment payments and dividend arrangements might indicate an indirect financial relationship between them.
Santosh Paudel, spokesperson for the Nepal Telecommunication Authority, told Khabarhub that discussing Ncell’s financial liabilities before the renewal deadline is premature.
He acknowledged, however, that fees from Smart Cell and UTL have long remained uncollected.
The government led by Pushpa Kamal Dahal ‘Prachanda’ formed a committee to investigate Ncell’s share purchase and sale but did not release the report or advance its findings.
Similarly, the Congress-UML-led government has yet to provide any official stance on the Ncell issue.
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